A DECLARATION OF WAR
Good morning. I’m back and still digesting Friday’s Amazon-Whole Foods news. (Nothing like a bombshell deal announcement on a summer Friday when I happen to be out of the office! Thanks again to Anne for filling in for me.) Here is a roundup of the best analysis I’ve seen:
On Instacart’s future: The delivery startup had a strong response to the news (emphasis mine):
“From the beginning, we’ve been committed to helping grocers compete online. That’s more important than ever given Amazon just declared war on every supermarket and corner store in America. We already work with over 160 retailers across the country and look forward to partnering with many more.”
TechCrunch notes that Whole Foods represents less than 10% of Instacart’s revenue. Whole Foods’ stake in the startup is below 1%.
Bold Bezos: “Only 1 company on earth can buy grocery chain, be rumored to buy enterprise software company & in both cases be lauded for strategic vision.” – LinkedIn CEO Jeff Weiner.
“For Bezos, wounded assets in important or growing business categories aren’t challenges to be avoided. They are puzzles to be solved.” – Bloomberg
“What distinguishes Amazon [from Google, Apple and Facebook] is that it’s the company most willing to work on mundane, everyday problems. … While Google and Facebook have yet to drive significant revenue outside their core businesses, and Apple is only just beginning to, Amazon Chief Executive Jeff Bezos has managed to create business after business that is profitable, or at least not a drag on the bottom line.” - WSJ
Bezos & Whole Foods CEO John Mackey: “The two men—who only got to know each other a few weeks ago, people familiar with the matter say—are iconoclasts whose outsize personalities shaped their companies. They pioneered new strategies in their industries—Mr. Bezos by shifting retail online, Mr. Mackey by popularizing health food—and they are intensely competitive, say people who have worked with them.” - WSJ
Mackey & Panera co-CEO Ron Shaich: Recall that Shaich joined Whole Foods’ board as part of activist investor Jana Partners’ shake-up. Fortune’s Beth Kowitt notes that Shaich’s experience selling Panera to JAB Investors might have created a roadmap for Mackey to sell:
“Shaich and Mackey here are one and the same—two company founders inextricably linked to their brands, who were not ready to give up control. Shaich told Fortune at the time, "I spend about 20% of my time explaining what I do and what I'm about to do," he said. "I think being private, for Panera, doesn't give us anything other than it frees us up." … Mackey was clearly taking notes.”
Not a done deal? Neuberger Berman portfolio manager (and 2.7% Whole Foods shareholder) Charles Kantor sees Amazon’s offer as a starting point. He tells WSJ: “It’s not a big check. I would be very surprised if this is the final chapter of Whole Foods.” He adds: “Those that have deeper pockets may feel they have to respond for a strategic asset of this ilk.” Cerberus Capital Management, which owns Albertsons, was a rumored bidder in the past…
What it means: "Implications ripple far beyond the food segment, where dominant players like Wal-Mart, Kroger, Costco and Target now have to look over their shoulders at the Amazon train coming down the tracks, but also the potential for multi-channel, which Amazon up until now has largely eschewed," according to Moody's retail analyst Charlie O'Shea.
Why? “To the outside it may seem that Amazon is buying a retailer. The truth, though, is that Amazon is buying a customer — the first-and-best customer that will instantly bring its grocery efforts to scale.” -- Stratechery
Jobs? Amazon expects to reduce headcount and change inventory to lower prices and make Whole Foods competitive with Wal-Mart and other big-box retailers, Bloomberg reports. That includes using its nascent no-check-out tech. (Amazon denied plans for job cuts.)
UNICORN WATCH: Reddit is raising funds at a $1.7 billion valuation, Bloomberg reports. The company’s last round of funding, in 2014, including a motley crew of bold-faced names: Josh Kushner, Peter Thiel, Marc Andreessen, Jared Leto and Snoop Dogg.
DONE DEAL: That Temasek investment in ClassPass that we first reported on in May has closed. The company raised $70 million from Temasek, along with Acequia Capital, CRV, General Catalyst, GV, M13 and Thrive. [This item has been updated with the correct funding amount.]
ILLINOIS VS. PE: The carried interest debate is going local. Daniel Bliss, an Illinois Senator who is running for governor, has introduced a bill that would tax investment gains and close the carried interest loophole. Crain’s Chicago reports:
While business investors would normally trust Gov. Bruce Rauner, a former private-equity executive, to veto the legislation, the industry's trade group fears the unpopular Republican may cave in an election cycle that pits him against Biss and a pack of other Democratic contenders.
Illinois investors that supported Bliss see his bill as a slap in the face. Others that support closing the loophole, including J.B Pritzker, fear state laws will cause investors to flee the state and would prefer that states wait for national legislation.
Illinois is not the only state taking matters into its own hands. Earlier this year New York, New Jersey, Massachusetts and Rhode Island and Connecticut created a regional effort to close the loophole.
THE LATEST FROM FORTUNE...
• Snap shares sink to IPO price.
• Can Airbnb professionalize itself without losing its personal touch?
• Brexit negotiations begin.
• Altaba begins trading today.
• The American Technology Council meets in the White House today. Here’s what it means for tax reform…
• What is “techplomacy”?
Asian buyouts priced for unlikely perfection. Susan Wojcicki’s YouTube. Arianna Huffington’s influence at Uber. Inside Techdirt vs. the “inventor of e-mail.” Health care tragedies are taking over crowdfunding. Americans believe U.S. moral values are at a 7-year low. Blackstone’s struggle to win over investors. Scott Minerd’s unconventional approach at Guggenheim Partners. The ether thief. The race to solar-power Africa.
• Casper, a New York-based mattress and bedding startup, raised $170 million in Series C funding. Target led the round, and was joined by Tresalia, IVP, Norwest, Lerer Hippeau Ventures, NEA, Irving Capital, Kevin Spacey, Curtis “50 Cent” Jackson, Carmelo Anthony, Kyrie Irving, Shaun White, and Andre Iguodala.
• Reddit, a San Francisco-based online content platform, is raising approximately $150 million in funding at a $1.7 billion valuation, according to Bloomberg. Read more.
• ClassPass, a New York-based fitness startup, raised $70 million in Series C funding. Temasek led the round. Existing investors including Acequia Capital, CRV, General Catalyst, GV, M13 and Thrive participated.
• Augury, a New York-based Industrial Internet of Things software platform, raised $17 million in Series B funding. Eclipse Ventures and Munich Re/HSB Ventures led the round.
• Codota, an Israel-based coding startup, raised $2 million in seed funding from Khosla Ventures.
HEALTH AND LIFE SCIENCES DEALS
• Gamida Cell, an Israel-based genetic disease company, raised $40 million in funding. Shavit Capital led the round, and was joined by VMS Investment Group and Israel Biotech Fund, and Novartis. Existing investors Clal Biotechnology Industries and Israel HealthCare Ventures participated.
• Cybrexa, a New Haven, Conn.-based cancer therapeutics startup, raised $6 million in Series B funding. Investors include HighCape Partners and Connecticut Innovations.
PRIVATE EQUITY DEALS
• BP Energy Partners will sell portfolio company Pinnacle Midstream, a Houston, Texas-based oil and gas exploration company, for at least $300 million, according to Reuters. Read more.
• CCMP Capital and MSD Partners, will acquire Hayward Industries, an Elizabeth, N.J.-based commercial swimming pool equipment manufacturer. Financial terms weren’t disclosed.
• Inverness Graham acquired GPSTrackIt, a Temecula, Calif.-based fleet tracking software. Financial terms weren’t disclosed.
• Stevenswood Trade Centres, a portfolio company of Cairngorm Capital Partners, acquired Sameday Holdings, a U.K.-based window and door supplier. Financial terms weren’t disclosed.
• First Reserve agreed to acquire the integrity maintenance platform of EMS USA, a Houston-based pipeline and energy operations provider. Financial terms weren’t disclosed.
• BV Investment Partners made an investment of an undisclosed amount in Hero K12, a Miami Lakes, Fla.-based education software provider. Financial terms weren’t disclosed.
• Main Capital made an investment of an undisclosed amount in Verklizan, a Netherlands-based software provider.
• PerkinElmer Inc (NYSE:PKI) will buy Euroimmun Medical Laboratory Diagnostics, a Germany-based medical laboratory reagents manufacturer, for about $1.3 billion in cash. Read more.
• Lululemon Athletica (Nasdaq: LULU) made a minority investment in 7mesh Industries, a Canada-based cycling apparel startup. Read more at Fortune.
• Engie SA (ENXTPA:ENGI) agreed to buy a 40% stake in Dubai's National Central Cooling Company (DFM:TABREED), according to Reuters. Engie is buying the stake for 2.8 billion dirhams ($762 million) from Mubadala Investment Co. Read more.
• Cambuhy Investimentos and GP Investments are among investment firms considering a bid for Alpargatas SA (BOVESPA:ALPA4), a Brazil-based clothing and accessories manufacturer, according to Reuters. Read more.
• Delivery Hero, a Berlin-based food delivery service, said it would raise about 927 million euros, or $1.04 billion in an offering of up to 39 million shares on the Frankfurt Stock Exchange. The shares will be priced at a range of between $22 to $25.50 a piece. The company, backed by German company Rocket Internet, posed revenue of EUR 349 million($393 million) in 2016. Citigroup, Goldman Sachs, Morgan Stanley have been named joint global coordinators. UniCredit Bank, Berenberg, Jefferies, and UBS have been named as additional joint bookrunners. Read more at Fortune.
• Blue Apron, the New York City-based meal kit company, said it expects to sellf 30 million shares in the range of $15 to $17 a share, raising as much as $510 million. Goldman Sachs, Morgan Stanley, Citigroup, and Barclays are lead underwriters in the deal. The company brought in $795.4 million in revenue in 2016, on losses of $54.9 million. Pre-IPO, Blue Apron is backed 23.8% by Bessemer Venture Partners, 10.5% by First Round Capital, and 6.5% by Stripes Group. The company plans to list on the NYSE under “APRN.” Read more at Fortune.
• Tintri, a Mountain View, Calif.-based company focused on virtual machine storage, said it plans to raise $100 million by offering 8.7 million shares at $10.50 to $12.50 a piece. Morgan Stanley and Bank of America are joint bookrunners in the deal. Pre-IPO, New Enterprise Associates owns 22.7% of the company, Lightspeed owns 14.5%, Insight Venture Partners owns 20%, and Silver Lake Kraftwerk owns 20.4%. The company booked revenue of $125.1 million for the year ending January 2017, and loss of $105.3 million.
• Boston Omaha Corp., a real estate and billboard company based out of Boston, Mass., plans to offer 6.5 million shares at $13 a piece, raising about $84.5 million. That’s within its previously stated range of $12 to $14, but larger than its previously estimated offering of 5.5 million shares. Boston Omaha says it will trade on the Nasdaq under “BOMN,” with Cowen and Company as underwriter. In 2016, the company reported $3.8 million in revenue on $3.2 million net loss. Magnolia Capital Fund (pre-offering 55.6%) and Boulderado Partners (37.4%) back the company.
• Mersana Therapeutics, a cancer therapy biotech company based out of Cambridge, Mass., set the terms of its $75 million IPO Friday. The company plans to list on the Nasdaq under “MRSN,” and offer 5 million shares in the range of $14 to $16 a share. It booked revenue of $38.9 million and loss of $13.7 million for 2016. J.P. Morgan, Cowen and Company, and Leerink Partners are joint bookrunners in the deal. Pre-IPO, New Enterprise Associates owns 41% of the company, Pfizer owns 1.6%, and F-Prime Capital Partners owns 9.9%.
• Byline Bancorp, a Chicago-based financial firm, said it plans to offer 5.7 million shares at a range of $19 to $21 a share, raising $114 million. The company had 57 bank branches and $2.2 million in loans and leases by the end of 2017’s first quarter. Pre-offering, MBG Investors I holds nearly 47% of the bank, ECR Holdings with 8%, and Fambeck Servicios Financieros del Exterior with 7%. Bank of America and Keefe Bruyette and Woods are acting as joint bookrunners of the deal.
• Dova Pharmaceuticals, a Durham, N.C.-based company focused on a low blood platelet count disorder, said it plans to raise up to $69.1 million in an IPO of 4.06 shares priced between $15 to $17 a share. The company plans to list on the Nasdaq under “Dova,” with J.P. Morgan, Jefferies, and Leerink Partners as book-running managers. PBM Capital(pre-IPO 84.8%) and Perceptive Advisors(5.4%) are the company's backers. The company has yet to generate revenue, and posted a loss of $27.2 million between April and December 2016.
• Europcar (ENXTPA:EUCAR) agreed to buy Goldcar, a Spain-based low-cost car rental company, from Investindustrial, according to Reuters. The deal would be valued at approximately 550 million euros ($616 million). Read more.
• Arsenal Capital Partners sold its portfolio company Flowchem, a Waller, Texas-based manufacturer of pipeline performance products, to KMG (NYSE: KMG), for $495 million.
• TEGNA (NYSE: TGNA) agreed to sell CareerBuilder, a Chicago-based job-hunting website, to Apollo Global Management (NYSE:APO) and the Ontario Teachers’ Pension Plan Board. TEGNA’s estimated cash proceeds from the sale are expected to be approximately $250 million.
• BrideClick acquired the assets of Mode Media, a Brisbane, Calif.-based lifestyle site operator, which abruptly shut down last year. It will re-launch as Glam.com. Financial terms weren’t disclosed. Mode Media had raised more than $224 million in venture funding from investors including Accel Partners, BDCA Venture, and DFJ.
FIRMS + FUNDS
• Alpine Investors, a San Francisco-based private equity firm, raised $532 million for its sixth fund, Alpine Investors VI LP, according to the Wall Street Journal. Read more.
• Dubin Clark & Company, a Boston-based private equity firm, raised $74.85 million for its newest fund, DCCP Fund II, LP. according to an SEC filing. The fund’s target is $110 million.
• Permira, U.K.-based private equity firm, plans to raise two new buyout funds of $1.5 billion each, one for Asia-focused deals and one for growth-stage investing, according to Private Equity News. Read more.
• HC Technologies, a Chicago-based principal trading firm with offices in New York City and London, announced the formation of its private equity arm, HC Private Investments. HCPI will invest in lower-middle market manufacturing companies ranging in size from $10 to $100 million in enterprise value focused on consumer and industrial markets. Typical equity investments will vary between $5 million and $25 million.
• Andrew Huang joined FountainVest as a managing director. Previously, Huang was at Goldman Sachs.
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Polina Marinova produces Term Sheet, and Lucinda Shen compiles the IPO news. Send deal announcements to Polina here and IPO news to Lucinda here.